Despite a greater focus on environmental targets in the region and the increased spending on sustainability by Gulf Cooperation Council (GCC) energy players, GCC’s investments in this regard will not contribute materially to cash flow over the next five years.
GCC’s sustainability investments rise, but are unlikely to shake up energy markets, according to a recent report conducted by S&P Global Ratings.
According to S&P Global, the slower spending pace stems largely from regional energy companies being significantly more shielded than global peers’ from energy transition risks due to their unique competitive position. The lower profitability of renewables projects is another factor that could explain so-far modest investments.
“We also see that the sector’s sustainable debt issuance is unlikely to experience a significant increase, in part due to the low number of suitable projects being implemented,” S&P added.
Moreover, S&P said that sustainable issuance is unlikely to see a strong uptick, noting that the energy industry would continue to account for a minor part of the total issuance of sustainable debt securities in Gulf countries in the short run.
In 2021, the overall issuance of sustainable debt securities for Gulf countries – including green bonds, green loans, sustainability bonds, sustainability-linked loans, and bonds – hit a new high of $14.5 billion.